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The Kudlow Report

News/Business. Larry Kudlow. Larry Kudlow provides his unique perspective on business, politics and investing. New.

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S&p 15, China 15, Us 6, Katie Stockton 6, Mr. Bernanke 5, Jack Bouroudjian 5, Larry Kudlow 5, Ben Bernanke 5, Kudlow 4, Joe Mccool 3, John Kilduff 3, Steve Liesman 3, Geico 3, Kelly Evans 3, Abigail Doolittle 3, Scottrade 3, Washington 3, Ubs 2, Smith 2, D.c. 2,
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  CNBC    The Kudlow Report    News/Business. Larry Kudlow. Larry Kudlow provides his  
   unique perspective on business, politics and investing. New.  

    June 20, 2013
    7:00 - 8:01pm EDT  

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>> a tough day. still in the blast zone. certain stocks haven't started to do that. remember, mu is one i am blessing tomorrow him i'm jim cramer. i will see you tomorrow! ♪ ♪ ♪ >> a major sell-off on wall street as the markets stand in revolt against ben bernanke and the fed. i'm larry kudlow, welcome back to "the kudlow report's" special coverage of today's market meltdown. let's begin right away with our special coverage right on wall street and find out exactly what happened and why. cnbc's own bob pisani has been following it for us all day. give us your details and your take and good evening. >> good evening. 550-point decline in the dow in two days, larry. i'm calling this a mini perfect storm. several things, three in fact came together to cause most of the problems. first, the fed action causing people to worry about interest rate rises down the road. second, china is trying to
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reduce liquidity and they're trying to trick their own asset bubble and real estate there and that's causing gyrations in the emerging market world and we have an options exploration tomorrow and the options and futures when the s&p 500 drifted below 1600 in the middle of the day, that was a key option level and i think that hurt the markets as well. take a look at emerging markets and there is a lot of debate going on tonight about to what extent china is hurting. emerging markets and the rest of the world and to what extent the fed is. it's 50/50 at this point and look at china down 4%, the philippines, all of these emerging markets have been hit and this is the worst one we've seen. repatriation of money overseas causing the dollar to rise two days in a row and that's hurting commodities rather notably. look at gold down 6% and that's one of the worst we've seen in a long time. copper and zinc generally work to the downside and those base metals, indication of a slower global economy. commodity stocks, of course, they get hit when the dollar rises, 3%, 4% declines.
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they've been down 15% in the last six weeks here. let's move on here. there was no place to hide. it didn't matter. consumer staple stocks down 3%. utilities were down 3%. consumer discretionary defense care is not defensive. there wasn't any place to hide. i just want to note, larry, the s&p 500 down 5% from its historic high just about a month ago, but it's still up almost 12% on the year. bear that in mind, i want to know we're already getting deals cancelled and we had one secondary canceled tonight and brookfield renewable energy and they own wind mills and natural gas-fired power plants and they canceled late tonight due to what they call market conditions and the slide to the downside. larry, right now the futures are pretty much unchanged and we'll have it open tomorrow with a lot of trading and it will be the options exploration. after that, a lot of people here are hoping for a relatively smooth day, but nobody knows for sure. back to you.
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>> robert, we'll talk about the fed and interest rates quite a lot on the show as you began to. i want to go to china with you for a second. i'm reading a 25% interbank, overnight interest rate or a seven-day interest rate. 25%. you'll recall in 2008 it was the freezing up of the repo market, the interbank market where banks would not loan to each other that really caused the freeze and the meltdown. what is the take on china? how serious is this going to be and why is their central bank allowing this risk to happen? >> well, they had two problems. first they're trying to prick the real estate bubble. remember what happened in 2009 and the global meltdown and they pumped massive amounts and hundreds of billions of dollars into the economy. the bottom line, a lot of it ended up in loans and real estate and a lot of that real estate is looking iffy right now and they have to prick that bubble and they have to do it gently just like the feds have to do and the second is the
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shadow banking system and four banks control most of the lending in china. if you want to go outside of the system, they charge higher rates and they've been the beneficiary of a lot of this liquidity. the government in china is trying to regulate and tap down because they're concerned -- >> it is extremely dangerous. >> it's one of the things we learned in october, september, october of 2008. it is extremely dangerous when banks can no longer lend to each other. the whole system freezes up. china may not be the whole story today, bob, but i think china was a big part besides the fed. >> the important thing here is when you get rumors ever banks not able to repay their overnight loans to each other, the central bank has got to step in any provide that liquidity. >> that's exactly right and if they don't, i'll tell you, all bloody hell is going to break out. >> anyway, bob pisani, thank you ever so much for the update.
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we appreciate it. >> just a moment, my own take without intending to do so and perhaps without even realizing it, i believe fed head ben bernanke launched a major de facto tightening policy during his news conference yesterday. that's right. the new idea of the 7% unemployment target to end qe in a year was a new announcement, no one expected it that clearly and it completely spooked all of the markets. with respect to mr. bernanke's acumen, i have to disagree with him on several counts. first, it's still a 2% real economy. it not a that great. jobs may be slowing and businesses are not investing and only housing when sales in may ran 13% ahead a year ago and only housing is really strong and i don't think hooefb even a 4%, 4.5% mortgage rate will stop housing, but, but, basic inflation is only 1%. bond market indicators of expected inflation are actually falling. money supply is softening and
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nominal gdp growth is too low. you know what? you could almost make a case that the federal reserve is now too tight if you look at those indicators, not too loose. look at gold. it got killed today and king dollar holding up nicely. another point, deflation is in the air. that's my take. so while mr. bernanke jumped the gun this week, that's my take. the markets are in full revolt against them, they are trying to say to him, sir, go slow. go very slow. in a weak economy that has no inflation you might even wait for pro-growth tax reform and budget restraint out of washington, d.c., but i think this is the market message, we do not need less money and higher interest rates. not now. the fed training wheels do need to come off, but they have to come off very slowly. all right. that's my tech with all respect to mr. bernanke and others.
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let's bring in katie stockton, managing director and chief market technician at mkm partners. jack bouroudjian and cnbc's own steve liesman joining me on set also. we have jim la camp, senior investments of ubs. almost lost you in the teleprompter, no way. >> you heard my take. what say you? >> i think you and bernanke actually agree. i think he's saying he's going slow and i think it's very interesting that bernanke said all of the things that you said he should be doing, and the market heard i'm raising rates, and i don't know to what extent -- there's an expectation, a right amount of expectation that the market's going to hear what he says. >>ia, but he said -- let me just go into this for one second. >> go ahead. the way he did it, in other words, people are figuring out when is he going to slow down bond buying? is it going to be this month or next month. what he did was give a one-year
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plan that could be shorter and a 7% unemployment threshold. >> we have not heard that, steve. >> yes, we have. >> we have never heard of 7% before. >> he hasn't said it. jim buller said it to me in january and if jim buller hadn't said it, you can divine it how? >> you have to expect it if it's a 6.5% target for raising interest rates, it's got to be somewhere around a 7% unemployment rate for stopping quantitative easing. >> he never said that before. him. >> i agree with that, and actually that's correct, and the fact that ben bernanke said that it was absolutely not what market people were thinking he was going say. he really crossed it. >> i have to say, larry, it's been too long since i've been on set with you since you talked about m2. >> i'll give you a take because i don't mean to be extreme. i don't mean to be shocking. i'm just saying, if i looked at
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the slowdown in m-2 and the nominal gdp and the crash of gold as well as the deflationary drop in stocks. you know what i say to myself? it's not out of the question deflation is in the air and the fed is too tight. it's too tight. >> this economy is not in that great a shape. if you look at the manufacturing numbers and even the reports that are better than expected and the philly fed and the components of those the jobs market is not gaining any traction at all. it's a lot of messing around full-time jobs for part-time jobs and if you look at savings rates they reflect this. they have plummeted this year. where are retail sales going come from? >> i think the market is saying now? really? the good news for the market si think the bond market has overreacted because ben bernanke's forecast about economic improvement have always been too optimistic. >> did anyone hear the conditional nature of this promise if the forecast proves to be true? >> if it doesn't prove to be
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true it won't happen. on it's like a bad lead in the column. he buried his lead. i. >> i felt the conditionality -- >> jack bouroudjian, you'll have to sell this whole thing. welcome back. let me ask you with regard to the getting slaughtered of stocks and the slump in stocks, how important was the jump in long-term treasury rates? corporate rates jumped also. what's the linkage between the rate jumps and the stock's decline because that linkage could determine how far this thing goes. >> larry, that's the fast money. let's understand what's been going and there's been a carry trade going on and everyone has been using the cheap money and using the fed. my wife's a nurse and she told me one of the most painful thing is watching someone go through withdrawal. that's exactly what we have right now. zee an economy going through withdrawal and some of the economy and it's not a lot of it was addicted to this cheap money. the reality is i like what the fed chairman did. he came out with this when the market was near its top.
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had he done that when the market was down 200 s&p point from here it might be a different story, but i like the fact that he's let a little of this fluff come off, and i'm a buyer of this break and with the withdrawal comes and aren't you supposed to have some positive feeling before you hit withdrawals? >> it's not only that. it's the policy itself that i'm objecting to. >> katie, welcome to the show. you've got to jump in. this is a rough crowd. you've got to jump in. i'd like it hear your take on today's market on the inerds of this market including gold which got slaughtered today and only the dollar held up nicely. what did you learn from looking inside the market whether it's trading volume or sectors in the s&p. what did you learn? >> a lot of things from today, in fact. it was a very important day in a lot of levels and volume was one thing that bears paying attention to, of course. usually which it's just bo, we
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don't pay too much attention to it and when we speaks, and that's more characteristic of the client of climactic behavior in the market. selling climaxes and everybody talks about these things. the last climax we had was on may 22nd when the s&p 500 topped out and of course, that's also the last time that we had a spike in volume. >> katie, warrant there a key breakdown? a technical breakdown. you're the chartist i'm not. 1598 it broke right through that. it broke right through that like a hot knife through butter. does that mean we'll have to go and find a much lower resistance point on the other side of the s&p 500? >> 1600 is a very widely watched level and importantly so because it's a round number and also makers previous resistance level for the s&p 500, but what's very important is to always wait for confirmation of breakdowns and also breakouts in this case and of course, a breakdown which
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would be pending confirmation and i say confirmation meaning at least consecutive weekly closes before a certain level and that's to avoid shakeouts and whipsaws and especially when the level is so widely followed to stick to that discipline. for me the breaking points were around 1550, anyway. >> 1550. steve liesman, how how are the interest rates going to go? >> i think you could see 2.50 and 2.60. it's a battle right now, and the fed will raise interest rates and the feds cash. there are still tens of billions of dollars of federal reserve cash that will come into the economy through quantitative easing between now and june 2014 and then when they get done with qe they are still at this point the forecast is another year before zero interest rates rise. you still have two years. i'm just afraid the market didn't hear what the chairman said. we're still buying at least for another year.
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we're still going to be low, at least for another -- >> we're going to buy less. >> we're going to buy a lot less. >> can i counter one thing. >> i just want to say this. i believe markets are very smart. >> i agree. >> when you see this kind of action in stocks. when you see this action in gold. gold is amazing and also bonds. >> inflationary impulse. >> yeah. >> it's a deflationary impulses and that is something -- >> and they're all in sync with each other and that troubled me enormously as it unfolded. if if the fed did not -- it would actually be abeasing. it must reduce the purchases relative to the total stock. >> hang on. we'll come back in a minute and i just think de facto, de facto, not actually, but de facto, he made a major tightening move yesterday. >> the market confirms exactly what you say, larry. i think that's the whole problem. shall we say, steve liesman, it
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is a great pleasure to have you. >> thanks for having me. >> everybody else will stay put and we're just getting started with tonight's special coverage of today's major day with the markets and our economic policy. we'll be right back to continue and please, please, please, especially on a night like this, don't forget that free market capitalism is the best path to prosperity. how about pro-growth tax reform to help out mr. bernanke and the rest of us. i'm kudlow. we'll be right back. (announcer) scottrade knows our clients trade and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody.
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welcome back to our special tonight. i'm back here with katie stockton, jack bouroudjian and cnbc's own kelly evans. >> okay. i know you're here every day on "squawk on the street" god bless, but you did serve a turn in london and i regard you as an internationalist. maybe you can weigh in briefly. number one, this credit freeze in china, the interbank loan market in china, 25% interest rates, this is the kind of thing that led to the 200 crash, and number two, kelly, the emerging markets problem. you know when we sneeze here in the usa they catch cold. what do you think about that? how did that contribute to today's sell-off. >> the first one i was already
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to come come on here and there's been a de facto tightening, and you made the point better than i could have even, and i would just say. >> go ahead and make it. >> go ahead. exactly that. if you look at basically we're in this kind of bizarre situation where even though people are getting more optimistic about growth prospects in the u.s. at least until a couple of weeks ago and what we were seeing was an increase in inflation and expected inflation. as grew know, inflation expectations in the market have been falling. so what that does is it means interest rates are effectively rising and we've had that in place since january and we've moved up about 50 bases points and then you throw in the ten-year on top of that and we're talking about a really significant move and you can then begin to understand why the markets have reacted the way that they have. >> so we'll get back to china in a minute. let's stay right where you are. i agree with every single thing you just said and it tells me, kelly, it tells me that there is some deflationary forces. >> right. >> right. >> and this is one of my
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objections to mr. bernanke coming out with a one-year plan to end all quantitative easing. >> larry, what's -- >> i would say to him, sir, not now, you may be right later, but not now. >> no, you're right. what's really interesting about this as well is this is why people are starting to talk about to what steve was just saying, whether the fed is pulling back in part because it wants to be able to expand policy down the road if it needs to. there are some constraints with regard to purchases in part because we did have a massive rally in e quites for the first part of the year and perhaps there was a sense of things getting overexetended. what it does mean for equaty investors and they don't have the win/win situation up to this point. with going back to the point about emerging markets is this doesn't have to be disaster for the u.s. it depends on how markets sort of shake out here, but if you recall the move just since may 22 rnd and it was b of a who
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made this point who with said weave looked 3 trillion on market cap because of the tightening that's happened across emerging markets and this is definitely the space to watch. >> jim, this is what's troublinging me. when we sneeze the rest of the world catches cold. i have worries about europe. >> right. >> look what happens in brazil. okay? >> they have inflation problems and they have rioting in the streets and china may have a banking credit crunch. this is not good. >> intervention is causing huge problem, you mentioned the cyborg rates and they may have lost control of the bond market there. at the same time we started to see rates spike up before bernanke spoke. is there a concern now from global investors that all of this intervention into free markets is backfiring and the central governors are not able to seamlessly move xhooez economies out of recession with
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money printing. have we painted ourselves into a box. >> kelly, give me a nickel's worth. i'm not that optimistic on the economy. >> i've noticed. >> inherently, i like to be optimistic. i think the housing story is a big story. i think the business investment story which creates jobs is a lousy story right now. >> i think the jobs story is really mixed and you can make the argument is slowing down and give me a nickel's worth on the economy from your point. >> at least we've gotten to the point where the job gains are more consistent month to month, but it's not to a point and this is what markets tell us. forget what i instinctively feel about this, we can basically get a signal out of all of this which is that we didn't see stocks selling off because interest rates were rising. what we saw during the day was rates coming back after testing those highs and stocks selling off and it's back to the old situation where risk sells off because there's a sense that the economy isn't strong enough.
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i kind of look at that and the message to me is pretty clear and the question just becomes, if you're the fed, what do you do? how long before you have to come in and support this. >> how about doing nothing? they could have stayed where they were. it's like le camp just said, these guys like to turn the dials all of the time. >> it's like the hot and cold water. why don't you just leave the faucets alone for a change. >> a lot of people going into the meeting were saying six weeks ago they talked about how inflation expectations were anchored and what we've seen especially with regard to what happened in the last couple of weeks isso that they were actually falling in the market. >> you're exactly right. why didn't they acknowledge that and it had something to do with the positive supply shot coming from the changes we've seen in oil, but it's still a very interesting conundrum. >> we have more one more segment with kudlow. we'll be right back.
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i'm larry kudlow. i'm here with katie stockton, jack bouroudjian and cnbc's own kelly evans and jim la camp. i know you want to get in and i want you in. i want you to react to what kelly was talking about. you have this rise of interest rates and let's just do it year to date. the ten-year is up 66 basis points year to date, but as kelly evans correctly noted.
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inflationary expectations offer the treasury break evens whether it's the ten-year tip and the five-year for it and i know it's technical, but that's the way the market gauges future inflation. those things are down by 50, 60 basis points and it's a real, real rise in market rates and when you get a real, rise in market rates, that could really shake off the economy. that's the stuff we have to worry about. >> larry, let's understand. let's take a deep breath and understand, number one, these are still very historically low interest rates, all right? the other part of the equation is, remember, we need to get to that natural inverse relationship between bond prices and stock prices. that decoupling which is what we're going through right now is a very messy decoupling and it's something that will take a couple of months, but it's not a reason to sell equities. >> remember, there is still a compelling reason to buy equities and valuations are
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still very, very compelling and quite frankly, you remember this low inflation story is actually a bullish reason to buy equities. >> tell that to the federal reserve board. >> i'm convinced. tell it to the federal reserve board. >> the one thing -- >> tell them about mediocre -- i hate to be rude. >> tell them about mediocre economic growth and falling expectations. >> low inflation is good. deflation is not good. >> if ben bernanke leads, which is what people are talking about and that's what's being whispered, who is going drive the bus? that uncertainty is what people are not talking about. >> that's a good point. that's a good point. >> and what we experienced over the last couple of days and it was triggered by what happened if china overnight i don't think that we have to pay too much attention to that noise. next week will be the real score going into the end of the quarter. >> when i see bank-to-bank lending freeze up i pay a lot of attention. katie stockton, i'm telling you, this is a rough crowd. you have to get in.
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i'll switch gears slightly. gold. gold lost, what? 95 bucks today. it's down below 1300. really, though, if you go back gold was at 1900 not so long ago and it's now down 600 bucks plus, what does that mean and how far gold goes down and your charts because an awful lot of people bought gold in this cycle and they are wondering what's up? >> this is true. so gold is very close to current levels and that's being tested and being tested very hard at that. now there's the chance that gold is also seeing a shakeout like i think the market might be and i say that because of the dramatic nature of today's decline in part, but also for the fact that it is very oversold and much more oversold than equities are in general at this time, and i think we need in terms of the equity market to look at it within the framework of the long term breakout to new all-time
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highs by the s&p 500 and we saw this massive breakout above the 2007 highs with the 13-year trading range and that sets a bullish bias for the months and years to come and that's why we need to view this correction as something that's likely to be short term and we can drive the long term upside. >> katie stockton, with all due respect, and i love mkm, and mike cardia, with all due respect to your charts, the chairman of the board of the federal reserve just got up in front of the whole world yesterday and said guess what? in the next year or sooner, we are going to end quantitative easing and we are going to end bond buying and we are going to end the injection of new reserves that creates the necessary money supply. that ain't bullish for gold. i'm sorry. >> that's, like, he's, like, trying to close the barn door and after all of the horses have gone out. that just isn't bullish for gold. >> i don't know that it's a
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downtrend that you really want to fight. i would much prefer being long uptrends which would be more the s&p 500 and its constituents, and to me gold does have a floor around current levels where momentum would start to improve and we watch momentum on equities and they are very much positive and there is time when momentum is out of sync with what they're doing. >> deli, vans, you saw the jobless rates today? what's your read? am i too tough in saying this say 2% economy? because that's all i can get out of it. you tell me. >> no, but it goes back to this point and i would agree with the point that ultimately we could see support here for equity, even for gold if what happens in response to all of what we're seeing, larry, is the same thing that's happened, which is gold is good, but not great. as soon as the fed steps back there is a market freakout.
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that's what i'm trying to figure out, is that what's going to happen? is it going to take one more payroll report or is it the next fed meeting? >>, if the data continues to improve or come in okay, then we also find support here. there's more risk for the rest of the world than -- actually. should the fed target the stock market? >> no. of course, not. that's the key. >> i believe in market price signals like gold and bond rates and bond spreads, but targeting the stock market, kelly, i think that kind of gets us into an area we don't want to be in. >> absolutely. they would say the same thing. everyone in the market just knows that we've been operating on a policy whereby they used the equities to gauge where the economy is going which is a reliable thing to do over time. i'm more worried about the upside than the downside and what if they take off with support and take off another 20, 50%. that's when you start to look at the differentiation and get
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worried. >> so far, profits since 2009, profits have supported the rise in stocks. it's not me -- i don't know see the bubble. >> don't expect the earnings per share, and remember the number of shares shrinking because of all of this. i'm supporting all of this. >> i know. i know. i know. that is way too technical and profits have gone up as much as stocks and that's good. if the stocks start going up just because of the fed's injecting money. i have to get out of here. katie stockton, jack bouroudjian and kelly evans. be sure to watch kelly tomorrow morning and cnbc's "squawk on the street" is where you will see how the market opens. >> market watchers join us to break down today's huge market drop, 354 points for the dow. i'm kudlow, i want to know when this drop ends and when is the buying signal coming?
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welcome back. i'm larry kudlow. we continue now with our special coverage of today's market meltdown and major shift in fed policy. joining me now is john kilduff,
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knowledge inning partner. adam valledes from dmc securities and jim is still there and senior vice president of investments at ubs. okeydokey. john, geld cracking like i've never seen it crack, maybe going back to the early 1980s, for heaven's sakes and what hasn't cracked is oil and i want to ask you why not. >> it's been stubbornly supported and it has other things going for it other than the monetary support and the rest of the markets and even the worries about china. there's been these persistent production issues, okay? and the geopolitical risk premium has gone up considerably with syria and with the violence in iraq and that oil is hanging in the balance and we just had a pipeline shutdown of nigeria again today. if you add it all up and it's been consistently off the market. >> even with all of the stuff that we are producing, all of our oil, shale production. >> it's not enough. >> we are close to the tipping
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point, larry, where a lot of these things won't matter anymore, but we're not there yet. >> usually when the stock market crashes like this oil goes with it. this is not like 2008 and i want to make that very clear, and i just want to use 2008 as a theoretical example. when everything went down, everything went down and it hasn't happened here. why not? >> it's different here since 2000. the etfs run the show right now. you saw oil break its 200-day moving average and you saw the housing market index. >> oil broke down. >> yeah. you knew that. you're not worried about that? >> all right. please continue. >> so the s&ps break the 50-day and the dow break their 50-day and once they do that, the etfs usually can bounce off the earnings news and there are no earnings. so they're just bouncing off of what the s&p does and once that broke down they got out of reach. >> that's why you're not buying yet. >> we've been supporting the 50-day moving average since
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december and it's been a tremendous buying opportunity and every time it tested a 50-day moving average on the way up. >> not only did you break through with that level, but you broke through with conviction and volume and we've seen the biggest spike in interest rates that we've seen in four years. this is a different dynamic that we've seen earlier on in the year and the volume was heavy enough and enough groups were breaking down and the breadth was massive to the down side to where i don't see technically a reason to buy yet. if you go down to the 200-day moving average which is your next level of support and that's about 1,000 points on the dow and another hundred points on the s&p. >> tomorrow is a critical day, and we have to look at triple explorations and 1600 and four on the s&p index. if you don't hold here -- >> what happens inside the market in terms of how the market traded today. in other words, when there were
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upticks, did anyone rush in and what was the electronic stage and the electronic tradinging. what was going on inside on the inside? >> whether it was buying on the dips and that has to do with the trip of the more orrer the end of the ways. >> there was no pain are panic. >> you know a lot about other commodities and please include gold in this, but materials got whacked pretty good. materials got hit pretty good minus 2.5%. they were pretty near the worst of it today. metals have been doing rather poorly. gold you know all about. >> to allen's point about the etf. the gold etf and the silver etf are creating a negative feedback whereas people are selling that and that's forcing them to liquidate the gold and silver
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holdings and there are big players and we know in the hedge fund world that had been stubborn -- >> mr. paulson will go bankrupt? he was down 55% as of a week or two ago? >> how bad is that? >> he is deep in blow-up territory? >> was he leveraged going down? physical and the future. >> it's not just those and the stock etfs, too, and what happens is if you have so much of your liquidity in the market is either high frequency traders or etf traders and you start breaking these levels and it creates a bit of a vacuum and you don't have enough people playing in this market. they're not absorbing. >> i'm going for another point upon. i'm going for another point. guys like paulson. i've never met the gentleman and it's a brutal story on gold. if he has to cover his shorts he may have to raise cash. that may be a theme for large hedge fund players betting on
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inflation, cold and silver. if they want to raise cash he'll from to sell even more of the etfs and share the futures and that will y2k thing thing, is there a contagion. well's not enough room, and they're still shawl by the equity markets. >> and the play is housing and if the interest rates keep going up. >> hang on. stick around. back with more special coverage of today's big market drop. we're trying to go inside the market and see what that means and we're trying to find the bottom. so far we've been unsuccessful. i'm kudlow. we'll be right back. clients are always learning more
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>> welcome back, everybody. i'm larry cuddly. let's bring abigail doolittle, strategist. still with us, jim lecamp. abigail, you have been waiting patiently for a big market correction. the market's gone against you right now. this is your correction. what are you thinking?
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what do your numbers show? how long does this correction continue, for example? >> i think the real thing to think about here is volatility. you've had building volatility over the last month and it's been building into the sell-off and i think we're moving toward a 10% to 20% correction. last time i was on i was saying 20% -- >> 10% to 20%. >> am i right? we're down 5%. >> so you're saying we could go down another 15%. that is tough stuff. >> i feel very strongly about it actually in terms of looking at the charts and the technicals that i do, not only with the s&p 500, but cross-asset charting and also with the vix, i think we'll see the s&p drop down to a minimum of 1532 and we may find buyers, but there's an excellent chance that we could see 1449 and that would be fitting. >> what leads us down another 14%. it's not going to be the banks or the financials and that's actually good for those guys. we've seen a smackdown in
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commodities. what's your leading indicator for the next 15%? >> i think that it's really going to be a broad market sell-off. i think it's very similar to what we've seen over the last four years. this entire qe and also to some extent profits rally out of the -- >> i give you credit for that. absolutely. >> i may be wearing out my welcome. >> if we look at this entire rally, 140% of it hasn't been straight up. there have been these pullbacks. so right now we're in the middle of one of these pullbacks. however, i don't know that it's going to actually support a move up toward another high again. >> you were saying the index is going down 15%. the whole index. >> spdrs and etf s, and whatever. >> i'm bearish. i have a sell rating on the xhb and the homebuilders etf, and a $21 price target and so have the xlb and the materials sector. >> i just want to go jim le
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kant, homebuilders is on my sheet it's got the worst number today minus 8.7%. with the rallying in home would abouters it's now flat year to date. i said earlier in the show and i'll say it again. i believe that the whole housing sector is a bright spot and will remain a bright spot. we'll get new housing starts later in the week. existing sales are pretty good and the construction numbers may be a little slower and still pretty good. sentiment pretty good. a 4.5% mortgage rate, i don't want to tell you, but my first mortgage rate was 25 years ago when i bought a home in washington, d.c. so would you come back and buy homebuilders or any of these housing-related stocks? >> theirs are really good. if you talk to homebuilders is we just can't get in with the materials and with materials costs falling that's going to help them and what happened in the home building industry, and
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you don't have a lot of new supply on the market because of the constraints that you mentioned and i think the profitability for these companies will be very good. does that mean their valuations aren't still out of line? in many cases the valuations are still out of line and you wait until they consolidate and correct more. >> one follow-up on this. the investor groups buying houses, allen. you read that and i believe it was a big "new york times" story, and that doesn't count because investors pull it together to buy cheap homes and they will try to sell those homes to d ins and does that detract from the story? >> i have to think west of the hudson and east of l.a. it was a different rode, and i would get a robust money and the housing market because she perceives there's a lot going on.
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i don't think that's a true pitch of the market and the economy in general. >> so you actually don't think the housing sector is as strong as they say. >> no. >> i would agree and relative to investors being in the housing market it makes it more of a trade as opposed to a long-term asset that's held on, and if you look at that. >> i can't even get housing. >> people weren't buying higher end homes and now they are. i tuked and that is continuing to move up. >> if we look below that critical, you could make the case for an improving market. >> hold on. the group will be here for one whole segment. we hope you will stay with me in tvland. i'm larry kudlow. please hang out. you suggested luxury car service instead of "strength training with patrick willis." come on todd! flap them chicken wings.
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>> we are back with a group of market watchers, jim lecamp, abigail doolittle and a quick check of the futures right now. they're flat. they're flat. the nasdaq looks like it's down a little bit, but they're flat. it's okay. we're going survive this, i don't know what that means, but they're flat. john kilduff, i hear from all of you. you know i'm an optimist and i love this country and we're still a capitalist country despite the efforts of people in washington, defenda.c., and i'm looking for a little bit of hope and prayer. would you buy anything out
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there? >> i still like the refiners and slowly the employment picture is improving and we are well along in the cycle even though johnless claims ticked up today and we were looking for a low number that didn't come true and that means gasoline demand, not just here, but gasoline demand around the country and around the world is strong. the products are tight and if you have a refinery it's like being in the airline business a couple of years ago. they're shutting them down and not building new ones and there's great demand for the product like diesel fuel and jet fuel. >> i still like valero, internationally, total. those are really the best -- >> i'm looking for something to buy, but if you don't have one, you want to have me something to sell. what's on your mind? what's on your mind? >> i think bernanke's got a lot of troubled past few days. >> you asked me can i just butt in? he's got some amends to make. he's got some amends to make, all right? when you were wrong, you should
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promptly admit it. that's from a different segment from a different show, but i really feel he screwed up royally yesterday. that's it my point. >> i have to agree. in the big picture he's done a great job, and i think he's not going taper until the economy's stronger. 6.5% unemployment. we're not going get that this year. >> even though we laid out a whole scenario of no more bond buying. >> i think he's testing the market. >> for that, i like the bank, and i think the financials and interest rates. >> long-term rates go up, right? short term rates are anchored at zero, right? >> so the cost of money, and the loans out at a much higher yield and even a banker can make money with the yield curve slopes upward. even a banker can make money. >> actually the financials were the best performers today and they were only down 2.2%. do you have anything to buy at all? >> i have a shopping list.
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i do want to buy those regional banks and they were the ones really hurt by fed policy and now if it unwinds they'll know the one who gets the biggest bang for their buck there. >> qe, better for the big banks because it all flows through the training. >> it's community banks and they had access to capital that these local guys didn't have. that's why -- that's yet downsides of the policy. >> big cap tech that didn't participate in the first half of this year. you're seeing very interesting things. >> i have to go to abigail. we're running out of time. you want to buy something? >> right now i would be more inclined to recommend that investors hedge portfolios by shorting and i do have short recommendations on the spy and the iyt, and the iwm which are the s&p 500, dow transports and small cap, xlb and a short
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position for the near-term volatility and i do think the treasury yield 2%. >> a very total, unmitigated bear. you look great. >> many thanks to my panel. great stuff. john kilduff, abigail doolittle and adam valdez and jim le camp, and that's it for this evening's show. i'm larry kudlow. be sure to tune in tomorrow morning on "squawk box." thanks for watching. [ male announcer ] i've seen incredible things.
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>> narrator: in this episode of "american greed: the fugitives"... meet joe mccool -- a man with promises and plans for other people's life savings. >> we could get 10% a month on our money. sounded awful high, but awfully good, too. >> narrator: he is accused of profiling his clients. >> the older you were, the more vulnerable you were, the more likely you were gonna become joe mccool's next target. >> narrator: but after the money runs out, mccool loses his cool. >> if he didn't like what you had to ask or say, he would hang up on you. >> narrator: and, finally, when no one is looking, joe mccool slips out of town. but first, in lexington, kentucky, jim hammes plays his role perfectly -- the hardworking family man. >> i thought, "wow, i hope i have a great husband like that someday." >> narrator: no one suspects he